Has Washington really calmed Wall Street? After months of bailouts, capital injections, guarantees and other unprecedented forms of government intervention in financial markets, the S&P 500 had its worst week since 1938, falling 6.8%. The U.S. stock market has fallen some 25% this month.

As I've pointed out numerous times over the past few months, the more Uncle Sam has done to "fix" the market, the more volatile, erratic and totally divorced from the underlying economics it has become.

The federal meddling has created such widespread distortion that you no longer know what price action can be trusted and what should be dismissed. So if XYZ falls, is it because the Treasury is taking a stake? If it rallies, it is because the Federal Reserve is planning a surprise rate cut? Will the government again ban short-selling or further expand its program to buy commercial paper? Are money markets actually sound or just being propped up by more bailouts from Hank Paulson and Ben Bernanke? Traders big and small are scratching their heads trying to figure out where the manipulation ends and the real market begins.

Not surprisingly, many investors are retreating to the sidelines in disgust. It's been widely reported that many of the largest and most active investment funds such as SAC Capital or Citadel have liquidated large components of their portfolios and aren't deploying new cash. In my conversations with clients and other individual investors, it would appear that the vast majority are looking to shed risk rather than assume it. Who can invest in a market in which the rules are being made up on a daily basis?

Not surprisingly, the markets aren't plummeting as much as they are drying up. The total amount of commercial paper outstanding has declined for six straight weeks, despite massive economic intervention by the government. And as I wrote last week, the IPO drought has now reached an historic 11 weeks. In effect, loans aren't being made and new companies aren't being funded. Business is creaking to a halt.

You can't manufacture confidence; it must be actually earned. Uncle Sam's efforts have created a regulatory uncertainty that you no longer know what to expect from one day to the next. However well-intentioned, the government's efforts have made a difficult market much, much worse. When the history of this era is written, that's the real story the scholars will likely miss.

An Icy Arbitrage

Jesse Livermore famously quipped, "There's a time to go short, a time to go long and a time to go fishing." With the market devoid of seemingly any predominant trends and the dollar scratching a new yearly high against many world currencies, now might be just the perfect time to take a few days off. The best opportunity right now might be in an overseas vacation, not investments.

Economic collapses are relatively rare. Yet there are even rarer in countries you'd actually want to visit. For example, you could probably secure top-of-the-line accommodations right now in Zimbabwe, where the socialist government has ruined that once-prosperous breadbasket, sending inflation spiraling to a record 236 million percent in July. Yet with starvation and extreme poverty now running rampant, I can't imagine it's an ideal spot for a weekend getaway.

Then there's Iceland. First world, English-speaking, capitalist and unique, Iceland was an appealing destination before its currency collapsed. It's even more affordable now.

Iceland's Crumbling Krona

Source: Exchange-rates.org

The European country of 300,000 was picked in August by USA Today as one of its top fall travel destinations. Yet hotels have become even cheaper now that the U.S. dollar has risen against the Icelandic krona by another 25%. Americans with greenbacks enjoy more than twice the spending power in Iceland as they did at this time last year. Icelandair is offering trips from the East Coast as low as $399 round-trip. That's probably a better deal than shares of Google (GOOG) right now.

Moreover, before the banking crisis, Iceland's main industry just happened to be fishing, which makes this a value-oriented trip of which Jesse Livermore would likely approve.